Amid a serious drought in orders for their mainstay cargo ships, leading Chinese shipbuilders are under growing pressure to win more contracts for vessels used in offshore oil and gas exploration.

Relative newcomers, the Chinese face formidable competition from South Korean and Singaporean shipbuilders that are more experienced in building specialized ships. But with strong government backing and a willingness to offer low- or no-margin deals, China could one day hold a strong position in offshore energy vessels in much the same way it won a significant chunk of the market for conventional ships.

“China needs to diversify its shipbuilding product mix away from its dependence on dry bulk vessels,” Barclays analyst Jon Windham wrote in a recent research note. “In our view, 2013 is the year in which Chinese policymakers will be forced to address the collapsing backlog in the industry.”

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Mr. Windham said the central government can support the transition to offshore by urging China’s policy banks—lenders such as China Development Bank that make funds available to help Beijing advance its policy goals—to offer generous loan terms including low down payments to potential buyers.

In addition, state-owned enterprises operating in the energy sector such as Cnooc Ltd. could be encouraged to buy some of its required offshore vessels from Chinese builders, he said.

Spurring the move to specialized ships is the world-wide glut in supply of conventional ships—such as bulk carriers used to transport materials like iron ore—that led to a collapse in freight rates. Exacerbated by the global economic downturn, orders for new ships dried up, leaving many of China’s hundreds of shipbuilders struggling.

Shipbuilding in China directly employs tens of thousands of people. Now, as order backlogs clear and with few or no new contracts in sight, the pressure to expand into other lines of business is intensifying.

Demand prospects for most types of specialized ships is “robust” reflecting an increasing reliance on offshore and deepwater sources of energy, said Jason Waldie, Singapore-based director with energy consultancy Douglas-Westwood.

Offshore vessels come in many shapes and sizes and vary widely in technological sophistication and price. For now, Chinese shipbuilders are making inroads in the market for less sophisticated ships such as jackup rigs, a segment where Singaporean builders dominate. A jackup rig is a barge-like vessel with extendable legs used mainly in shallow-water energy exploration.

A Singapore-built rig can cost up to $195 million, whereas a Chinese one could be 45% less, while more advanced vessels for offshore oil and gas exploration such as a floating liquefied natural gas facilities can cost more than $3 billion, said Mr. Waldie.

The ultimate goal of Chinese shipbuilders is to expand into specialized ships of higher value such as drill ships and semisubmersibles where South Korean shipbuilders have a clear edge. Unlike jackup rigs, these highly engineered vessels mainly operate in deepwater conditions.

South Korea’s top three shipbuilders—Hyundai Heavy Industries Co., Daewoo Shipbuilding & Marine Engineering Co. and Samsung Heavy Industries Co.—are likely to win a total $22 billion worth of offshore facilities in 2013, up 10% year on year, according to forecasts by South Korean analysts.

To be sure, offshore isn’t a remedy for all that ails China’s shipbuilding industry.

Barclays’ Mr. Windham said that around 70% of Chinese yards will simply fail in their attempts to move up the value chain. Shipbuilding experts in China typically predict up to 40% of China’s hundreds of shipyards could collapse.

But for a chosen few, expansion into offshore offers a lifeline.

Barclays estimates China’s market share in terms of deliveries of off-shore vessels–including jackup rigs, drill ships and semisubmersibles—to reach 25% in 2013, up from virtually none in 2005. The majority of Chinese deliveries are for jackup rigs.

For the five year period up to 2011, Singaporean shipyards had a jackup rig market share of about 50%, according to Douglas-Westwood.

“The offshore and marine industry has always been highly competitive,” said Tong Chong Heong, Chief Executive of Singapore shipbuilder Keppel Offshore & Marine Ltd., a unit of Keppel Corp. “We have managed to leveraged its strengths to stay ahead and time will tell if we can maintain our leadership position.”

Existing Chinese players include Dalian Shipbuilding Industry Offshore Co., Ltd. and Cosco Shipyard Group. New and aspiring entrants include privately owned Yangzijiang Shipbuilding Holdings Ltd. and China Rongsheng Heavy Industries Group. In December, Singapore-listed Yangzijiang won its first order for a jackup rig for $170 million.

“We are putting a lot of resources into offshore,” said China Rongsheng chairman and chief executive Chen Qiang said in a recent interview. The company recently established a unit in Singapore dedicated to offshore and is currently hiring more staff for the division.

Yet some analysts say a push by Beijing may not be sufficient to propel even leading Chinese yards to the top of the league of offshore vessel producing nations any time soon.

Mr. Waldie said a big challenge for Chinese players was improving their engineering talents, which in some areas “leave a lot to be desired.” He estimated it will take Chinese yards up to 10 years to acquire the necessary skills in the absence of growth through acquisition.

Barclays’ Mr. Windham is more upbeat. “I think the Chinese are going to be able to pull this off,” he said. “They are a credible threat for taking significant market share.”

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